Employees working on an air conditioner production line at a Midea factory in Guangzhou, China.
Jade Gao | AFP | Getty Images
BEIJING – China reported data for July that were well below expectations.
Retail sales rose 2.7% in July from a year earlier, the National Bureau of Statistics said on Monday. That’s well below the 5% growth forecast by a Portal poll and below the 3.1% growth seen in June. Within retail sales, hospitality, furniture and construction-related categories saw declines.
Car sales, one of the largest categories by value, rose 9.7%. Sales in the gold, silver and jewelry category rose the most, rising 22.1%.
Industrial production rose 3.8%, also missing expectations for 4.6% growth and a decline from the previous month’s 3.9% increase.
Fixed investment rose 5.7% year-on-year in the first seven months of the year, beating expectations for 6.2% growth.
Investment in real estate declined faster in July than in June, while investment in manufacturing slowed its pace of growth. Infrastructure investment grew slightly faster in July than in June. Fixed investment data is published on an annual basis only.
The unemployment rate among China’s youth aged 16-24 was a high 19.9%. The unemployment rate for all age groups in the cities was 5.4%.
“The national economy has maintained the momentum of recovery,” the statistics office said in a statement. However, she warned of rising “risks of stagflation” around the world, saying “the foundations for the domestic economic recovery have yet to be consolidated”.
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Analyst forecasts for July should show a pick-up in economic activity from June as China emerges from the worst of this year’s Covid-related lockdowns, particularly in metropolitan Shanghai.
Exports remained resilient last month, rising 18% year-on-year in US dollar terms, despite growing concerns over slowing global demand. Imports lagged, rising just 2.3% yoy in July.
However, China’s massive real estate sector has come under renewed pressure this summer. Many homebuyers stopped making mortgage payments to protest developers’ delays in building homes, which in China are typically sold before completion.
Deteriorating confidence puts future developer revenue at risk — and a key source of cash flow.
The potential for a Covid outbreak remains another drag on sentiment. A wave of infections in tourist destinations, particularly in the island province of Hainan, has left tens of thousands of tourists stranded this month.
The situation on the ground reflects the large gap between the goals set at the beginning of the year and the reality that followed. Hainan had set a GDP target of 9% but only grew 1.6% in the first six months.
Similarly, China’s national GDP grew by just 2.5% in the first half of the year, well below the full-year target of around 5.5% set in March.
China’s leaders hinted at a meeting in late July that the country could miss its GDP target for the year. The meeting did not signal any imminent large-scale stimulus but stressed the importance of price stabilization.
The country’s consumer price index hit a two-year high in July as pork prices rallied.
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